‘More work to be done’: Fight not over on super trustee SOA checks

Just hours before the first Delivering Better Financial Outcomes (DBFO) bill was to be debated in the Senate, Financial Services Minister Stephen Jones made slight amendments to the controversial changes to section 99FA of the SIS Act.

The concerns of many within both the advice profession and the broader superannuation sector, and indeed those of the Law Council of Australia, were centred on the bill’s wording potentially opening the door to trustees needing to rigorously review each statement of advice (SOA), thereby limiting access to advice and increasing its cost.

Speaking with ifa, Financial Advice Association Australia (FAAA) general manager of policy, advocacy and standards, Phil Anderson, confirmed that the removal of the “most contentious” areas would ensure that the current risk-based approach to assessing advice fee deductions remains appropriate.

“We’ve seen through ASIC report 781 a couple of months ago that that is not being universally applied, and in fact, of the 10 super funds that they looked at as part of that report, only seven of them were following some sort of process of review,” Anderson said.

“So, it’s possible that we’ll see other trustees step up to be more comprehensively looking at this.”

However, he stressed that as far as the FAAA is concerned, the issue is not over and “more work needs to be done in this space”.

“We think that there’s a couple of things that stand out. One is we don’t think that SOAs are the right documents to be looking at,” Anderson said.

“We think that it should be more appropriate to be looking at engagement letters or service agreements that define which services are being provided and the basis of charging for them.

“That should provide enough information that it shouldn’t be necessary for trustees to be reading statements of advice, which contain information that is personal and sensitive and really not appropriate to be in the hands of the super fund trustees.”

Another issue with the process of super fund trustees checking advice fees, which the FAAA argued against for months, is around members in retirement phase.

“We make this point really strongly that it should not be necessary to undertake a review of this nature at all when it comes to clients who are in the retirement phase,” Anderson said.

“If they have met a condition of release and they can access their money when they choose to access their money, then there is no need for trustees to be looking at advice documents whatsoever.

“So, we still think there’s more work that needs to play out in this space to provide more appropriate oversight regimes around compliance with the sole purpose test.”

Looking at exactly how to achieve these additional changes, he said the FAAA “wouldn’t close our minds” to a solution coming from either an updated guidance from the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) or through legislative reform that is “more specific as to what the expectation is”.

“We’re certainly open to either pathway and the question is whether the government intends to come back and have a look at this issue in in tranche two or not,” Anderson added.

As the advice profession’s collective attention turns towards the next package of reforms, which the minister said would be “developed over the second half of the year”, the FAAA’s key priorities are on the areas that will most ease the burden on financial advisers.

“Two key priorities with respect to the rationalisation of the best interest duty and the removal of the safe harbor steps, and then secondly, the rationalisation of advice documents,” Anderson said.

“They are our key priorities. I know that the new class of adviser is one that generates a lot of interest. One way to put it across the spectrum, but that’s not on our priority list. The ones that will make a real difference to making it simpler and more cost effective to provide financial advice are absolutely with respect to the best interest duty and safe harbor and the advice documents.”